How Upstart Xiaomi Rattled China's Smartphone Race

Low-Price Device Maker Undercuts Apple in Competitive Market

BEIJING—At the raucous September release event for Chinese smartphone maker Xiaomi Inc.'s latest device, fans with glow sticks and company shirts shouted loudest when founder Lei Jun announced its price.

At 1,999 yuan ($326), its Mi3 handset sells for roughly half the price as Apple Inc.'s new budget iPhone 5C. It is priced similarly lower to devices with comparable specs made by heavyweights such as Samsung Electronics Co.